Buy Starbucks Calls for Earnings Jump

Watch for Chris Johnson today on CNBC's Closing Bell at 4:20 EST. Next week
is huge for earnings. In fact, it's the biggest week of the season, with well
over 100 S&P 500 companies on the list, along with nearly half the Dow
Industrial 30. We have lots planned for Winning Edge subscribers this season,
including many trades played after reports to take advantage of overreactions to
earnings numbers. But we're here to hone in on one stock that we've pulled
from our Winning Edge trade list.  It's Starbucks (NASDAQ: SBUX ), the
bastion of baristas that's made quite a comeback from the depths of 2008 (the
stock has more than quadrupled off that low). SBUX reports after the bell on
Wednesday, January 26, with analysts calling for a modest 6 cent (18%) increase
from a year ago. We say modest because the company has averaged 70% growth
during the past four quarters. And the whisper number is 3 cents below the
analyst figure, another sign of lowered expectations. The stock has performed
extremely well after recent earnings reports, gaining ground after six of the
past seven releases. In fact, the shares have popped an average of 6.3% in just
one day following these reports. Currently, the stock is in a holding pattern,
stuck in a range between $32 and $33 for most of the past six weeks. The $33
level has been a bit sticky, probably because of heavy call open interest at
that strike. But another decent earnings report (SBUX hasn't missed an
estimate in seven quarters) could provide the boost the shares need to break
into territory last visited in early 2007. Starbucks Chart Sentiment is mixed,
meaning that we could see some unwinding pessimism that could translate into
buying. The put/call ratio is coming off a peak, suggesting that call activity
is gaining strength compared to puts. And 10 of 22 analysts rate the stock a
"hold," leaving room for upgrades. With the stock poised for a breakout,
earnings amid lower expectations could be just the spark. Jump on board with the
SBUX February 33 Call in the range of $1 before SBUX reports next Wednesday.
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